Did Janet Nguyen’s Vote Violate State’s Campaign Finance Laws?

Orange County Supervisor Janet Nguyen may have violated state campaign finance laws when she voted at CalOptima, the county’s managed health care plan, for $300,000 worth of contracts with an outside attorney, including one vote just days after the lawyer contributed $1,800 to her re-election campaign, according to a Voice of OC review of campaign finance records and meeting minutes.

The close timing of the contribution and the votes is exactly what the Levine Act is supposed to prohibit, according to the author of the state law. The law generally prohibits local elected officials who also are appointed to other government agencies from using the second position to raise campaign funds.

Former Assemblyman Mel Levine, D-Santa Monica, who wrote the statute, said it was intended to block political donations to ”an officeholder who was in a position to determine the outcome of a matter affecting the potential contributor.”

“I would think that elected officials who are appointed to a quasi-judicial body would know that the Act was designed to prevent them from soliciting or accepting political contributions from those impacted by their vote,” Levine stated in an email.

In an earlier telephone interview he said the law was intended “precisely” to prevent the kinds of vote-and-contribute transactions that records indicate occurred between Nguyen and Costa Mesa lawyer Todd Theodora.

“That was clearly squarely within the intent of that law,” Levine said.

Yet for Nguyen, her appointment to the CalOptima board of directors seems to have created a fundraising boom from the medical industry, just as the onset of Obamacare is set to prime an influx of cash into the county insurance plan for the poor, elderly and disabled.

Since coming onto the board and reshaping its structure in favor of hospitals, medical providers and county agencies, Nguyen’s contributions from the health industry spiked from around $15,000 to more than $95,000.

That kind of ability to raise funds has also helped Nguyen draw support from key Republican leaders as they seek to retake the state's 34th Senate District seat from Democrats.

Last night at the Azteca Mexican Restaurant in Garden Grove, California Republican Party Chairman Jim Brulte was scheduled to join county GOP Chairman Scott Baugh and a host of key Republican financiers and elected officials from across Orange County for a “kick off” fundraiser for Nguyen’s state Senate bid.

Nguyen acknowledged being an “aggressive” fundraiser but has said she does everything within the law. She did not return phone calls seeking an interview for this article about her campaign contributions.

Theodora, who also is backing Nguyen’s Senate bid, did not return phone calls to discuss his campaign contributions.

The Theodora Reports

Theodora created three confidential reports for the CalOptima board of directors, according to the 2012-13 grand jury. An attachment to one of the Theodora reports was taken “out of context,” leaked to The Orange County Register and “portrayed the executive management team of CalOptima as inept,” according to the grand jury.

That leaked attachment to one of Theodora’s reports helped cement Nguyen’s control of CalOptima, appearing to give credence to her previously undocumented allegations of management problems at the $1.5-billion county health plan.

The original mismanagement complaints that led to Theodora being hired were leveled by a CalOptima lawyer and were without merit, according to the grand jury’s summary of the Theodora reports.

Backed by two other supervisors and with the support of the Hospital Association of Southern California, Nguyen remade the CalOptima board to strengthen the role of health industry providers, including hospitals, health networks, doctors and clinics, as well as county agencies that report to Nguyen.

According to the grand jury, the hospital association helped discredit the previous CalOptima board chairman by circulating an anonymous letter that falsely accused him of misusing his position.

Multiple requests by Voice of OC to the current CalOptima board to disclose the full Theodora reports have been rejected by CalOptima lawyers on the grounds they might dissuade staff from speaking candidly about future problems.

In the wake of Nguyen’s reshaping of CalOptima, nearly two dozen key executives, including the CEO, chief medical officer, chief financial officer and chief operating officer, quit the agency for jobs in private industry or other government agencies.

Theodora’s original contract to “conduct a personnel investigation” was approved by the CalOptima board, including Nguyen, on May 5, 2011, according to meeting minutes.

On June 29, 2011, Theodora and his wife Tracy each gave Nguyen $1,800 campaign contributions, the maximum allowed by law at the time, according to Nguyen’s campaign reports.

Just over a week later on July 7, 2011, Nguyen voted to approve a $200,000 boost to Theodora’s contract, the minutes show.

And on Dec. 1, 2011, about five months after the contributions, Nguyen voted for a new $100,000 deal with Theodora’s firm “to supervise an operational review.”

Levine said he wrote the law to prevent this type of fundraising.

The Levine Act

The Levine Act is aimed at local elected officials who try to use their appointments to other agencies to raise campaign funds.

The law generally prohibits local elected officials from approving or influencing contracts or permits for anyone who gave a campaign contribution of more than $250 in the 12 months before the vote or three months afterward.

It doesn’t apply directly to boards of supervisors or city councils, but it does cover supervisors or council members who also sit on other agencies, such as water, transportation or other governmental boards.

In addition to votes in public meetings, votes taken in closed sessions, such as settlements of lawsuits, also fall under the law.

That could potentially trigger other Levine Act violations for Nguyen.

Western Medical Center is owned by Integrated Healthcare Holdings Inc., which also owns Western Medical Center in Anaheim, Coastal Communities Hospital in Santa Ana and Chapman Medical Center in Orange.

On March 1, two days after the fundraiser, CalOptima held its regular monthly meeting, and the agenda included a closed session discussion of lawsuits, including one that involved Integrated’s Western Medical Center of Santa Ana.

Once the suits are settled, the votes from that meeting, including whether Nguyen voted or recused herself, will become public. But so far, the information isn’t available because final action on the case has been repeatedly postponed.

A vote by Nguyen in favor of a settlement would be another potential Levine Act violation.

According to the 31-year-old Levine Act, “No officer of an agency shall make, participate in making, or in any way attempt to use his or her official position to influence the decision.”

In addition, both the vendor and elected official are required to publicly disclose any contributions of more than $250 made to the elected official.

The law was passed in 1982 with “broad bipartisan support,” Levine said. It was prompted by a Los Angeles Times investigation into a Los Angeles City Councilman who used his secondary appointment to the California Coastal Commission to raise campaign funds.

Levine said voters can hold someone accountable for their actions as an elected official, but when that same person serves simultaneously as an appointee to a commission or agency, “the appointed position was one where there was no accountability.”

The FBI

An FBI public corruption task force has been reviewing political activity by elected officials in Orange County and others with influence in government.

The federal task force, which includes the FBI, Internal Reenue Service, U.S. attorney’s office and Orange County district attorney’s office, was formed not long after an Orange County grand jury report called for the creation of a county ethics commission and recounted the county’s history of officials being convicted of public corruption charges.

FBI agents have spoken with at least one county contractor who had been called by an assistant to Nguyen, Voice of OC reported earlier this year.

In April, the Fair Political Practices Commission, which enforces state campaign finance laws, separately launched its own investigation of four members of the Board of Supervisors and all 10 members of the CalOptima board of directors.

In the 20 months before March 2011, when Nguyen joined the CalOptima board of directors, she raised at least $14,815 from the medical industry out of a total $187,141, or about 8% of all of her campaign funds.

In the 20 months after she joined the board, according to her campaign reports, she raised at least $95,916 of her $400,364 total, or about 24% of the money that came in during that time frame.

Since a grand jury issued a critical report on CalOptima and the FPPC launched its investigation, Nguyen and other CalOptima board members have increasingly abstained on votes.

For example, Nguyen abstained earlier this year when the board voted to allow one of her donors, lobbyist Chris Townsend, to receive some CalOptima business.

Townsend and his wife Michele donated a total of $8,800 to Nguyen between October 2009 and January 2012, including $3,600 for her 2012 supervisorial election, the maximum allowed. In addition, according to campaign reports, Michele Townsend’s parents, Rose Marie and James Myszka, also gave Nguyen $3,600 since 2009.

CalOptima board members are also now becoming better educated on campaign finance laws like the Levine Act.

As an example, the Orange County Transportation Authority, whose board includes all five supervisors and 11 city council members, has its staff research campaign and financial statements and alert members to agenda items that could be a conflict of interest.

In recent months, CalOptima staff has also begun more thoroughly warning board members of potential conflicts.